USD/CAD rises to fresh three-month high above 1.2600 on firmer USD, downbeat WTI
|- USD/CAD takes the bids near the highest levels since April.
- Covid woes, dilemma over Fed’s next moves put a safe-haven bid under the US dollar.
- OPEC+ move triggers the much-awaited pullback in oil prices.
- Risk catalysts remain the key amid a light calendar.
USD/CAD stays bid for the third consecutive day, up 0.21% intraday while refreshing multi-day near 1.2630 during Monday’s Asian session. The Loonie pair bears the double whammy of the US dollar’s safe-haven demand and the oil price weakness by the press time.
The US Dollar Index (DXY) remains firm for the third consecutive day as market sentiment worsens on the coronavirus concerns. The virus resurgence gains momentum in Asia-Pacific and challenges the UK’s “Freedom Day” unlock, putting a safe-haven bid under the US dollar.
Also weighing on the market sentiment could be the indecision over the US Federal Reserve’s (Fed) next move as the policymakers remain divided amid the latest data suggesting reflation fears and strong employment. On Friday, US Retail Sales and Consumer Sentiment printed mixed outcomes but details suggest the inflation expectations firming up, providing an additional reason to the Fed policymakers to adjust monetary policy.
Elsewhere, the US-China tussles also escalate and exert pressure on the risk appetite, in turn helping the US dollar. The latest update from Bloomberg said, “US Congress is aiming to hobble China’s ability to recruit scientists and academics in the U.S. as part of broader moves in Washington to confront the Asian nation’s growing clout.”
It’s worth noting that the weakness in prices of Canada’s main export item crude also propels the USD/CAD prices. “''OPEC and its allies agreed to gradually add more oil supplies to the market from August (400,000 b/d monthly hikes until Sep 2022) after Saudi Arabia and the United Arab Emirates resolved a dispute that was blocking the deal,'' said Reuters. The WTI drops 0.65%, down for the third consecutive day, to $70.75 by the press time.
Read: WTI drops and pops in the open on OPEC news
Against this backdrop, the US 10-year Treasury yield drops 2.5 basis points (bps) to 1.275% while the S&P 500 Futures print 0.42% intraday.
Looking forward, a light calendar requires USD/CAD traders to keep their eyes on oil price moves and market sentiment for fresh impulse.
Technical analysis
USD/CAD pierces 200-DMA amid overbought RSI conditions. Hence, a daily closing beyond 1.2625 becomes necessary for the bulls to keep reins. Otherwise, a pullback towards the previous support line from February, near 1.2520 can’t be ruled out.
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